Gold - Oil Outlook and Analysis

Gold to test resistance

(Jing Ren – Orbex)

XAU/USD grinds rising trendline

Gold rallies as the market awaits US inflation data. A break above the 30-day moving average has helped the recovery gain traction. A rising trendline from late July indicates a bullish bias. The latest pullback found support over 1765, confirming that short-term sentiment remains upbeat. A break above 1795 could bring back momentum buyers and push the bid towards 1814. 1855 at the start of the June sell-off is a major level where the bears could be expected to double down. 1785 is the first support in case of a retracement.

EUR/JPY continues to recover

The euro climbs as traders bet on a 50bp move by the ECB in September. On the daily chart, the directional bias is still up after it bounced off the floor at 133.50. A break above 137.30 forced some sellers out, leaving the door open for an extended rally. 138.90 on the 30-day moving average is the next hurdle and its breach could attract more followers in an attempt to push towards the recent peak at 142.00. 137.10 has turned into a demand zone and the psychological level of 135.00 would be a second line of defence.

FTSE 100 stays upbeat

The FTSE 100 edged higher supported by financial and commodity stocks. A bullish MA cross on the daily chart shows an acceleration in the rally. As the index grinds a rising trendline, the optimism is likely to attract more buying interest. 7560 at the origin of the June sell-off is a key resistance where the price action may start to struggle under the weight of profit-taking and fresh selling. However, if the bulls manage to lift the triple top at 7650, they could resume the rally in the medium-term. 7450 is an important support.

Oil resists to Russian supply cut, US CPI in focus

(Ipek Ozkardeskaya – Swissquote Bank Ltd)

Russia halted crude flows to Hungary, Slovakia, and Czech Republic yesterday because sanctions prevented payment of a transit fee. The news didn’t trigger a bull run in crude oil yesterday, though pushed the price of American crude above the $90 mark, warning once again that upside risks prevail to the down-trending oil prices. Good news was that the US oil inventories rose by more than 2 million barrels last week, versus a decline around 400’000 barrels expected by analysts.

Oil bulls are also quite this week, as US and Iran could finally reach a nuclear agreement, which would then unlock the Iranian oil and give a certain relief to the tight-supply market.

Chip stocks in trouble?

Micron Technology was the latest US chipmaker to warn of a significant slowdown in chip demand, yesterday. The stock tumbled 3.74% and sent Nasdaq’s semiconductor index 5% lower at some point. A Citi analyst said that they believe ‘we are entering the worst semiconductor downturn in at least a decade, and possibly since 2001 given the expectation of a recession and inventory build’.

Yes, but Micron also announced it would invest $40 billion in US plants relying on the government’s $52 billion bill, and to counter the growing Chinese competition. However, the disappointing quarterly results, and warnings of a slower industry demand could kill the Chips Act rally that was triggered at the beginning of last month.

Elsewhere, Coinbase announced a $1.1 billion loss and missed the revenue expectations in Q2 as the tumbling cryptocurrency prices battered earnings. Coinbase shares plunged 10%, Bitcoin slipped below the $23K mark, along with the selloff in Nasdaq stocks.

US inflation is crucial for sentiment

Today is probably the most important day of the week in terms of economic data, as the US will reveal its latest CPI data, and investors have high expectations of seeing a softer figure in July.

The US CPI data is expected to have slowed to 8.7% in July, from 9.1% printed a month earlier. The recent downside correction in energy and commodity prices, the sharp fall in inflation expectations, as released by the NY Fed yesterday, and deflation in online goods prices point that we may see some relief on consumer prices of last month. Rising wages, and high rents remain factors that could keep inflation sticky at high levels.

A CPI figure in line with expectations, or ideally softer will certainly temper the hawkish Federal Reserve (Fed) expectations, pull US yields lower and trigger a relief rally across stock markets. We could then see the S&P500 make another attempt on the critical 4200 resistance.

Looking at the gold chart, a further downside correction in the US yields, along with geopolitical tensions in Ukraine and Taiwan, could push the price of an ounce higher, and lead to a cup and handle formation, paving the way for a positive breakout above the $1800 mark in the coming sessions.

However, a higher-than-expected CPI print, or worse, a number above last month’s 9.1% print would revive the expectations that the Fed would continue hiking rates by big chunks – especially given that the jobs market seems surprisingly resilient to the Fed tightening so far. That would send the US yields higher and encourage a downside correction of the July stock rally. We could see the S&P500 pullback to the 50-DMA, around 3950 mark.

Read USDCAD Forecast: Bulls await US CPI for fresh impetus amid weaker crude oil prices

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